leverage
noun
, ˈlē-; ˈlev-rij, ˈlēv-\
Definition of leverage
(Entry 1 of 2)
leverage
verbDefinition of leverage (Entry 2 of 2)
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Synonyms for leverage
Synonyms: Noun
authority, clout, credit, heft, in, influence, juice [slang], pull, sway, weight
Synonyms: Verb
abuse, capitalize (on), cash in (on), exploit, impose (on or upon), milk, pimp, play (on or upon), use, work
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Examples of leverage in a Sentence
Noun
The union's size gave it leverage in the labor contract negotiations. The player's popularity has given him a great deal of leverage with the owners of the team. I used the leverage of the bar and a wooden block to pry the rock out of the hole.Verb
The company wants to leverage its brands more effectively. a reality show contestant who's trying to leverage her 15 minutes of fame
Recent Examples on the Web: Noun
In some cases, police have used the giveaways as leverage to demand that people hand over their footage, although Ring says it is supposed to be voluntary. — Hanna Kozlowska, Quartz, "Check to see if your police department is getting information from Amazon’s Ring cameras," 28 Aug. 2019 For running back Melvin Gordon, a teammate to Rivers who’s holding out for a better contract, James’ setback may have increased his leverage at the bargaining table. — San Diego Union-Tribune, "Column: James’ injury a blow to Chargers, but team still equipped to succeed," 16 Aug. 2019 Hasidic Jews tend to vote in blocs, increasing their political leverage. — Sharon Otterman, New York Times, "‘Keep the Hasidic Out’: A Small-Town Housing Showdown," 14 Aug. 2019 The concentration of Internet usage around services such as Facebook in itself creates privacy concerns over how Facebook and its partners leverage that data. — Sean Gallagher, Ars Technica, "Barr says the US needs encryption backdoors to prevent “going dark.” Um, what?," 4 Aug. 2019 Rather than increasing our leverage, Trump’s tantrum resulted in Iran’s decision to breach its obligations and begin enriching uranium. — Jen Kirby, Vox, "Why Kirsten Gillibrand’s foreign policy plan is one of the strongest yet," 26 July 2019 Baby Nichole is going to stay in Canada for as long as she can be used as political leverage, though Fred tells Serea otherwise. — Elena Nicolaou, refinery29.com, "The Handmaid's Tale Season 3, Episode 7 Recap: A Criminal Record," 5 July 2019 At the same time, if the court rules that DACA can live on, Trump would again lose his leverage and the standoff could continue until either party asserts control over the government. — Obed Manuel, Dallas News, "How the Supreme Court’s decision to review DACA might rattle the 2020 political landscape," 28 June 2019 His leverage was drastically undercut by Rich Paul’s public declaration that Davis would enter free agency in 2020 regardless of his trade destination. — Jeff Duncan, nola.com, "With Zion at center stage, David Griffin as choreographer, Pelicans fans are ready to dance," 21 June 2019Recent Examples on the Web: Verb
May leveraged her knack for gaining patronage into sporadic artistic opportunities. — Erin Blakemore, Smithsonian, "The New ‘Little Women’ May Finally Do Justice to Its Most Controversial Character," 14 Aug. 2019 In other, saner times, leveraging the political persuasions of absolute madmen against a political opponent would be a signal for a gentleman to rise from the table and leave the room without comment. — John Kass, Twin Cities, "John Kass: Weaponizing the dead of El Paso and Dayton," 9 Aug. 2019 Patrick sprinted underneath the pass, leveraged his 6-foot-4 frame in tight coverage from Raiders’ cornerback Nick Nelson and pinned the football against his facemask with one outstretched right hand for a 26-yard gain. — Kyle Fredrickson, The Denver Post, "“I don’t see myself as a role player.” How Broncos’ Tim Patrick aims to build on breakout season.," 24 July 2019 Officials say state incentives are a key way to leverage private investment and make New York state a leader in energy innovation. — USA TODAY, "Roller coaster ghost town, Alaska heat, rock hyrax pups: News from around our 50 states," 8 July 2019 The Soviet Union had similarly leveraged Europe’s compact geography for its benefit with the deployment of the SS-20 Saber some years earlier, putting major NATO capitals at risk. — Ankit Panda, The New Republic, "Trump’s Reckless New Missile Race," 5 Aug. 2019 Editor Ji is also leveraging technology to rake in ad revenue. — Sangeeta Tanwar, Quartz India, "TV anchor Vikram Chandra bets on AI-powered short videos to fix India’s broken news scene," 29 July 2019 The chain filed for Chapter 11 reorganization in September 2017 after buckling under competition from Amazon and several billions of dollars of debt from a 2005 leveraged buyout. — Los Angeles Times, "Private equity has killed 600,000 retail jobs, study says," 24 July 2019 And of course, the couple have leveraged their signature humor in many of the shots. — Jen Juneau, PEOPLE.com, "Jenny Mollen Hilariously Compares Her Two Sons to the von Trapp Kids 'After 3 Weeks in Europe'," 24 July 2019These example sentences are selected automatically from various online news sources to reflect current usage of the word 'leverage.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for leverage
leverage
nounFinancial Definition of leverage
What It Is
Leverage is any technique that amplifies investor profits or losses. It's most commonly used to describe the use of borrowed money to magnify profit potential (financial leverage), but it can also describe the use of fixed assets to achieve the same goal (operating leverage).
How It Works
Financial Leverage
Let's look at selected balance sheet and income statement information for Company XYZ.
Company XYZ has invented a new product that will revolutionize the widget market, but it needs to build a new $1,000,000 factory. It must choose between using equity or long-term debt to build the factory. We can see the impact on profits of both decisions.
Scenario A: Raise $1,000,000 by issuing new stock
XYZ is able to raise $1,000,000 by issuing 500,000 new shares at $2 per share. It builds its new factory and immediately sees revenues double and operating expenses increase by $300,000 (about 43%). Let's look at the impact on its financial statements:
Profit per share has almost tripled. That's pretty good.
Scenario B: Use financial leverage, raise $1,000,000 in debt
Let's see what happens if XYZ chooses to use $1,000,000 in debt to finance its new factory. Assume it can borrow at 5% per year.
By using leverage, Company XYZ increases the profit available to shareholders.
Operating Leverage
If we go back to Company XYZ, we can examine the effects of operating leverage on profits. Let's say the company is trying to choose between building their factory or outsourcing production to a third-party manufacturer. If they outsource production, they will pay $0.75 for each $1 widget they sell.
Scenario C: Outsource production instead of investing in additional fixed assets (the new factory)
As in the previous example, assume the company is able to double revenues when the new widget hits the market.
Comparing the results side-by-side, we can see the effects of leverage on profit potential:
Leverage it is not without risk. It requires a commitment to keep up with the principal and interest payments on the debt. If it's unable to do so, it will be forced into bankruptcy and shareholders will lose everything.
Why It Matters
Too much leverage can be bad, but there's no hard and fast rule as to how much is too much. No matter what its use, leverage can be a powerful tool when used responsibly. Savvy investors and companies use leverage to expand, hedge and speculate, but the overly aggressive can easily get in over their heads by losing money or going into bankruptcy.
For investors considering companies with debt, one of the most popular evaluations of a company's leverage is the debt-to-equity ratio (D/E). The interest coverage ratio, also known as times interest earned, is also a measure of how well a company can meet its interest-payment obligations. In general, these ratios suggest whether a company is "too safe" and is neglecting opportunities to magnify earnings through leverage or is overleveraged and at serious risk of default or bankruptcy.